If you are seeking help repairing your credit, then the last thing you need is for some scammer to give you bad advice or to steal from you. In order to avoid scams in the first place, you should be alert to common red flags, such as a requirement that you pay ahead of time. You can report credit repair scams to both the federal and state governments. In order to find legitimate credit repair counselors, you should review their information closely and ask questions before hiring them.

Refuse to provide personal details immediately. A credit counselor should tell you about their services before asking you to reveal any details about your personal financial situation. If the counselor wants to know your business right up front, then you should treat this as a red flag and move on.[2]XResearch source

Credit counselors should be happy to provide you information about their services through the mail or in person without pressuring you.

Don’t trust any promise of a new credit identity. One scam is to sell you a nine-digit number and call it your new “credit profile number” or “privacy number.” This number may be a stolen Social Security Number (SSN). After selling you the number, the agency encourages you to take out new credit using it.[3]XResearch source

The agency may also encourage you to get an Employer Identification Number (EIN) from the IRS. This number is typically used by a business and is not a substitute for an SSN.

If you don’t have a legitimate business and use an EIN, then you are probably committing fraud and could be prosecuted. You could go to jail or have to pay heavy fines.

Walk away from any agency that advocates lying. Some credit repair agencies will encourage you to get new credit by lying on application forms. For example, they might tell you to inflate your income or to use someone else’s name. It is actually a crime to lie. Any agency encouraging lying is definitely a scam.[4]XResearch source

Identify other bad business practices. A legitimate credit repair agency should help you come up with a plan to pay off your debts. However, some promote bad advice. If the agency tells you any of the following, then you should stop doing business with them:[5]XResearch source

You are told not to contact credit reporting agencies directly.

You are told to dispute information on your credit report that is accurate.

You are not given a description of your legal rights (called “Consumer Credit File Rights Under State and Federal Law”).

You are not given any kind of written contract or description of services offered.

Trust your gut. Sometimes, credit repair agencies make promises that sound too good to be true.[6]XResearch source In fact, they almost always are. If an agency promises to fix your credit in a short period of time or makes the process sound easy, then you should be on your guard.

Also be skeptical of any agency that promises to raise your score a certain number of points. They can’t make that promise.[7]XResearch source

Check with the Better Business Bureau (BBB). The BBB collects complaints about businesses, so you can always check your local BBB to find out if anyone has lodged a complaint against the credit repair agency. Visit www.bbb.org and enter the agency’s name and location.

Contact your state Attorney General. You should also check with your state Attorney General to see if complaints have been made or if lawsuits have been filed against the credit counselor.[8]XResearch source Scammers usually have many complaints. However, realize that a lack of complaints isn’t 100% proof that the counselor is legitimate.

Call the federal government to report. You can also report credit repair fraud to the Federal Trade Commission (FTC) at 1-877-FTC-HELP.[9]XResearch source Be sure to have evidence of the scam, such as the following:

File an online FTC complaint. You can also report the scam to the FTC using their complaint assistant, which is available here: https://www.ftccomplaintassistant.gov/#&panel1-1. At the website, you can file a report by clicking the following:

Click on “Credit and Debt” on the left-hand side of the screen.

Click on “Debt” to report the actions of a company offering to repair credit.

Identify the company by clicking “A company offering to repair your credit.”

Select how you were contacted (e.g., “I initiated contact”).

Provide requested information, such as how much you were expected to pay the credit counselor.

If you have questions, you can contact technical support Monday through Friday, 9:00 am to 8:00 pm Eastern Standard Time by clicking on the button.

Report the agency to the BBB. You should visit the BBB website and report the scammer.[10]XResearch source Provide all information requested by the BBB and offer a detailed reason why you suspect the counselor is a fraud.

Think about suing. You can always sue a credit repair agency that defrauds you. For example, you can sue to get compensated for the amount of money you paid to the agency or for however much money the agency has cost you due to their fraudulent behavior.[11]XResearch source

You can also seek punitive damages. This is an amount of money awarded to punish the credit repair agency.

Look for non-profits. Generally, non-profits are more reputable than for-profit credit repair agencies.[12]XResearch source When you find an agency, you can call and ask whether it is a non-profit. Often, agencies will advertise their non-profit status.

Get referrals. You can find a legitimate credit counselor from many different places. First, you should ask friends or family if they have ever used a credit counselor and if they would recommend the agency. Other places you can look include:[13]XResearch source

Check the list of counselors approved for bankruptcy counseling. The U.S. Trustee Program approves a list of counselors to provide pre-bankruptcy counseling.[14]XResearch source Many of these agencies can also provide credit repair services. You can check the list at the U.S. Trustee’s website.

Ask the agency about their services. A good credit repair agency will provide clients with a variety of services. You should get a flyer or check the website to see what they offer. Look for the following:[15]XResearch source

Ask other questions. Before hiring an agency, you should find out important information so that you can compare them to other agencies. Call up three or four credit counselors near you and ask the following questions:[16]XResearch source

Are they licensed to offer services in the state?

What are their counselors’ qualifications? Are they accredited by any organization? How were they trained?

Do employees get paid a bonus the more people they help sign up?

How does the credit counselor keep personal information confidential?

What are the fees and how are they charged (e.g., monthly)? Is there a set-up charge?

Get a written agreement. A legitimate credit repair agency should provide you a written agreement that explains your rights before you begin working together. Make sure to read this document closely. It should be clearly written and easy to understand. A solid written agreement should contain the following information:

the company’s name and business address

an explanation of the services they perform

an estimate of how long it will take for your credit to improve

the total amount you will have to pay

any guarantees

that you have a right to cancel without charge for the next three days

Verify payments are sent to creditors. Often, credit counselors will have you make one payment to them. They will then divide up the payment among your creditors and forward the payment on. However, you should always check with your creditors to see that they received your payment.[17]XResearch source

Some unscrupulous counselors might skim some money off the top of your payment and keep it for themselves.

Do credit repair on your own. You don’t need to pay an agency to repair your credit. Instead, you can do it yourself by reviewing your credit reports and removing inaccurate information. Then you will need to come up with a budget and stick to it.